6 things you should know before downsizing

Deciding to downsize can be a daunting prospect; after all, you’re leaving the home you’ve probably spent quite a bit of time in, and there are numerous memories attached to it. Beyond that though, the process can seem complicated and extremely time-consuming. That’s not a reason to put it off though! We’ve brought together a helpful little guide to ensure that you’re ready to downsize, and then some of the steps you should take as you begin the move.

Ensure you’ve got enough money saved

Do I have enough money to cover my retirement
Do I have enough money to cover my retirement?

First things first: you’ve got to be financially ready to downsize before you do anything else. A couple living modestly will spend $39,353 on living costs every year (and this is estimated to be about $60,264 per year for a couple living comfortably). This means, if you retire at 65 and live until you are 85, you would need $787,060 to cover your living costs. This estimate is based on a few factors and the calculation assumes you own your own home.

It is drilled into us by the financial sector that you have to put in the groundwork for your super early in life to enjoy a prosperous retirement. But what if you didn’t? What if your super isn’t going to cover your estimated living costs? Well, don’t panic. These tips can help you top up your super and live the retirement dream — without worrying about your finances:

  • Pocket the extra from bills and maintenance
  • Change super funds to get a better deal
  • Declutter for some extra cash – we talk a little more about this process below

Contribute the funds from downsizing to your super fund

Downsizing contribution to superannuation
Put that extra money away where it can work for you

As we mentioned above, retiring can be expensive. When you decide to downsize though, over-65s in Australia have a lot of luck. If you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution to your superannuation of up to $300,000 from the proceeds of selling your home. This is officially termed a “Downsizer Contribution” and is accepted by all Australian super funds. If you’ve been living in the primary residence you are selling for over 10 years, the money can go towards your future. Learn more about the process here.

Make sure you’re mentally ready

How do you know when it is time to downsize?
The Birmingham’s house in Gilston, Gold Coast.

Choosing to downsize is a big change — even if you feel ready financially, you may not feel ready mentally or emotionally. After all, you’ve got memories throughout the home you’re in now, and you might feel that moving away from them with make those memories feel less special or maybe forgotten. This isn’t silly and you shouldn’t feel bad, but you should recognise that you don’t need to be in a place to remember all the good times that have happened there. Don’t feel alone in this though: talk to your friends, family, and your partner about your concerns.

You can read our interview with some downsizers here, where they discuss their hopes and fears — and resulting happiness — when going through the downsizing process.

Choose your future home wisely

Downsizing The Storeys enjoying a social event
The Storeys enjoying a social event

Choose the type of project you buy into carefully; consider your needs now, and in ten, twenty years time. Do you want to live in an apartment or a house? How close will you be to friends and family if you move? What suits you better, one or two storeys? Do you want room for all the kids, or maybe just one room so you’re not overrun every weekend? And is traveling important to you? Maybe you need more or less storage?

There’s a lot to think about in regards to lifestyle when you downsize, but that doesn’t mean it has to be impossible to figure it out. You can use the articles below to help you understand why people chose to downsize the way they did, and hopefully it will help you finalise some of your decisions.

How (and what) to declutter

Decluttering to downsize
Decluttering to downsize

As the saying now goes: if it doesn’t ‘spark joy’, then it’s time for it to go! If only it were that simple though, when you’re going through all of your possessions to decide what to keep and what to take with you. We’ve put together a handy little checklist for you to use to ensure that everything you bring with you to your new home ‘sparks joy’:

  • If you had forgotten you owned it, it has to go.
  • If you haven’t used it or worn it in over a year, it has to go.
  • If a storage unit will cost more than what the item is worth, it has to go.
  • Have you got two? There’s no reason to double up. One has to go.
  • Is it functional? Broken or semi-functioning items such as temperamental blenders and socks with holes should not be making their way into your packing boxes. They have to go!
  • Would you buy it again? If you pick up an item and don’t answer yes to this question, it has to go.

If you want to read more about the process of decluttering, we’ve got a great article here about how to go about it. And don’t forget: one man’s trash is another man’s treasure. Just because you don’t want it anymore doesn’t mean that other people won’t, so sell some of your extra stuff to get some extra money!

Know how the recent changes to home warranty insurance will affect you

high-density housing
Knowing how the law affects you and your new home is really important – especially if you’re buying new or off-the-plan

Recent changes to home warranty insurance are particularly important to downsizers, as they directly affect them and can have an influence on decision-making. As for most Australians, a new home is the most expensive purchase they will ever make and having the knowledge of how this purchase is insured is crucial should something go wrong. Every new residential development in Australia is insured under some kind of new home warranty, but these policies can be very confusing and differ substantially from state to state, depending on the conditions under which your home is purchased. Generally, warranties for new-build homes offer coverage on workmanship relating to the structure itself as well as various components of the home such as ventilation, heating and cooling, windows, plumbing and electrical systems. New home warranty insurance is developed and regulated by state governments and is designed to protect buyers as well as construction companies and developers. As with any legal policies, cutting through the jargon to understand what you’re covered for can be overwhelming.

We’ve bought together everything you need to know about new property warranties in Queensland and the ACT, to help you feel secure in your decision.

The take away from all of this is that while downsizing can feel monumental and daunting, if you attack it in bite-sized pieces you’ll be fine! After all, more people are downsizing in Australia than ever before, so there’s got to be a reason people are doing it, and are happy with their choices. We’re sure you’ll be among them after you’ve made the move.

If you’re just beginning your property search for your new home, check out our reviews on new and off-the-plan apartments, townhouses, terrace homes, and house and land developments.

Written: 4 October 2019

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